Novacaixagalicia makes "scandalous" payoffs to three top executives

Spain is awakening to its own story of scandalously generous pay-offs made to the top management of savings banks, or cajas, which had to be taken over at the taxpayer's cost.

After it emerged that the top management of the failed Caja de Ahorros del Mediterráneo had awarded themselves multi-million-euro golden parachutes prior to the central bank taking over the reins of the caja, it emerged Monday that Novacaixagalicia paid out 23.6 million euros to three directors before they were replaced. The Galician savings bank was nationalized on Friday of last week after receiving an injection of ¤2.465 billion from the state Orderly Bank Restructuring Fund in exchange for a 93.2-percent stake.

According to sources aware of the situation, before José María Castellano and César González-Bueno took over as current chairman and chief executive officer of Novacaixagalicia, respectively, the then-top management asked for early retirement. José Luis Pego, the former general manager of the caja, received 10.8 million euros after taking early retirement at the age of 54; the head of the bank's real estate group, Gregorio Gorriarán, 7.5 million euros; and the deputy general manager Javier García Paredes 5.3 million euros. The latter was due to get a pay-off of 10 million, but he rejected 4.7 million of this amount because he believed it was excessive.

All three asked for the amounts due to them to be made in a single payment, including their pension entitlements. The current management of the savings bank is investigating whether the pay-outs can be legally withdrawn retroactively.

The governor of the central bank, Miguel Ángel Fernández Ordóñez, last Friday described the pay-outs to CAM's management as "scandalous," the same word chosen Tuesday by the secretary general of the opposition Popular Party, María Dolores de Cospedal, regarding those made at Novacaixagalicia. Economy Minister Elena Salgado's reaction was more measured as she described the golden parachutes at Novacaixagalicia.

"Personally, they seem quite unacceptable to me, but we will have to see if these payments are legallly in order [with the rules laid down by the savings banks by-laws]," the minister said.

Meanwhile, the Socialist Party's representative on the board of the savings bank, Mar Barcón, resigned on Tuesday in protest over the payments at the Galician savings bank.

Novacaixagalicia was formed from the merger of the two Galician cajas Caixa Galicia and Caixa Nova last year as part of a wave of consolidation in the sector at the instigation of the Bank of Spain. The former deputy general in charge of overseeing the merger process, Óscar Rodríguez Estrada, received compensation of 700,000 euros when he left, but will also receive a monthly pension for life. All of those who took early retirement are free to work elsewhere.